Mizuho Bank, Ltd. Asia and Oceania Treasury Department

WEEK AHEADTel: 65-6805-2000 Fax: 65-6805-2095

Vishnu Varathan |Lavanya Venkateswaran

G3 Asia

Date Country Period Survey* Prior Date Country Period Survey* Prior

12 Jan US Dec -- 101.4 09 Jan - 15 Jan CH Dec 2100.0b 2134.3b

JP Nov -- ¥2144.7b CH Dec 1227.5b 1430.0b

JP Dec -- 45.6/36.5

11 Jan CH Dec -0.1%/-1.1% -0.5%/-1.5%

13 Jan US Dec 1.3%/1.6% 1.2%/1.6% AU Nov F 7.0% 7.0%

EZ Nov -- 2.1% MY Nov 0.2% -0.5%

JP Dec P -- 8.6%

12 Jan IN Dec 5.0% 6.9%

14 Jan US 9-Jan-21 -- -- IN Nov -1.3% 3.6%

US Dec 0.8% 0.1%

US 13 Jan - 16 Jan CH -- 2.95%

JP Nov -- 17.1% 13-Jan KR Dec 3.2% 4.1%

JP Dec -- -2.2%

14 Jan CH Dec $72.35b $75.40b

15 Jan US Jan P 81 80.7 CH Dec 15.2%/5.8% 21.1%/4.5%

US Jan 3.8 4.9 IN Dec 0.9% 1.6%

US Dec -- 1.4%

US Dec 0.2% 0.4% 15 Jan ID Dec $2287m $2613m

US Dec -0.1%/-- -1.1%/-0.8% IN Dec -$11900mn -$9870m

KR 0.50% 0.50%

Retail Sales MoM

CPI YoY

BoK 7-Day Repo Rate

Retail Sales Advance MoM/Ex Auto and Gas

Wholesale Prices YoY

Trade Balance

Trade Balance

U. of Mich. Sentiment

Empire Manufacturing

PPI Ex Food and Energy YoY

Exports YoY/Imports YoY

Industrial Production MoM

EventEvent

Economic Calendar

11-Jan-2021

Aggregate Financing CNY

New Yuan Loans CNYBoP Current Account Balance

NFIB Small Business Optimism

CPI YoY/PPI YoY

Industrial Production YoY

CPI/CPI Ex Food & Energy YoY

Industrial Production SA MoM

1-Yr Medium-Term Lending Facility Rate

Unemployment rate SA

Trade Balance

Eco Watchers Survey Current SA/Outlook SA

Machine Tool Orders YoY

PPI YoY

Import Price Index MoM

Fed's Rosengren to Speak About Economy in 2021

Core Machine Orders MoM

Industrial Production YoYInitial Jobless Claims

Week-in-brief: Riding the Back of the Tiger- US Republicans learnt a harsh lesson on riding the back of the Tiger as the blowback from the seditious mob at Capitol Hill comes home to roost; many now desperately trying to distance themselves from the mob, the protests and in many cases, President Trump himself.- To be absolutely clear, I am not likening Trump to a Tiger. That would be disrespectful ... to the Tiger.- And an abject failure on my part to acknowledge that Trump himself is now in a desperate bid to save himself from political ruin, if not criminal liability, as he seeks to dismount from riding on White Supremacists and insurrection causes that he was earlier only too happy to exploit.- A motion to impeach Trump, initiated by House Speaker Nancy Pelosi may be underway as early as Monday (11th Jan). But that is not be the only ignominious exit that Trump needs worry about. - Tellingly, Vice President Pence has not ruled out a forced expulsion of Trump with the invocation of Article 25; unprecedented, significant and barring Trump from public office in future. - In which case, "Trump 2024" will be blown out of the water, even if Trump manages to skirt incarceration.- But markets are not plussed one bit by the unprecedented political drama. This is partly understandable as most are looking past the current noise to recognise an incoming Biden Administration in just over a week (9 days to be precise) along with a Democrat Senate that ups odds of immediate pandemic fiscal support.- So for all the upheaval on Capitol Hill, equities are raging higher and UST yields have been on a brutal upswing towards 1.12% after breaching 1%. Meanwhile, USD has continued to be on the back foot.- But to some extent USD bears, and attendant rallies in EM are riding the Tiger's Back; relying on precarious dynamics of softening real yields in spite of brutal upswing in nominal UST yields.- This seemingly counter-intuitive outcome is due to the surge in 10Y UST yields being outpaced by the the pick-up in corresponding inflation expectations (10Y Breakeven). This is in turn premised on monetary policy faith or more specifically, FAIT. ; the Fed's flexible average inflation targetting.- The reason this is akin to riding the back of the Tiger is that it is hard to say when nominal US yields will play catch up with inflation expectations, leading to a sudden upturn in real yields, which may accordingly trigger an upswing in USD (accentuated by record speculative shorts). - Meanwhile, a resurgence of COVID infections, with evidence of a more infectious, new strain taking hold in Asia (beyond the West) suggests that recovery and vaccine hopes also ride the back of the Tiger.- Japan has had to revert back to a state of emergency for Tokyo (and Osaka), Malaysia has reinstituted movement restrictions as has Thailand and most other countries in ASEAN. - As such, it would appear complacent to rule out some sputters in H1 2021 recovery trajectory; even if more targeted and nuanced restrictions mean that any setback is unlikely to be as severe as Q2 or Q3 2020.- But despite these renewed downside risks, which complicate the recovery picture, we do not expect the BoK (Fri) to ease further. Not by way of headline rate cut (from current record low of 0.50%) anyway.- Instead fiscal levers will remain as the main tool of choice to navigate this bumpy recovery out of COVID as vaccinations get underway; with monetary policy justifiably playing a supporting role.- Elsewhere, India's CPI (Tue) release assessed if much-needed relief from "sticky" and elevated inflation (near-7%) will provide the RBI with some desperately sought policy space . - All said, the bigger picture is likely to be one fixated on US politics and UST yields; whether the latter is fired-up in spite of the Trump's "rigged election" travesty or becasue of "Biden boost". Both are potentially tigers caught by their tails as US politics reveals attempts to dismount from the back of one.

US Treasuries

- 2021 has started with a brutal steepening of the UST yield curve; with 10Y yields surging >20bps to 1.11-

1.12% while 2Y edged up to 0.13%. This, to be clear, is notable only as an acceleration of the post-FAIT* trend

rather than a sharp inflection in UST yield dynamics.

- The confluence of higher oil prices, rallying equities and vaccine hopes and have helped to bouy UST yields

and may continue to do so this week; in defiance of US political upheaval.

- Fact is, markets may not be spooked outright by either Trump's impeachment or Article 25 deposement

given that Biden has been confirmed by the Senate.

- Instead, markets may be far more focused on Biden's plan for further pandemic fiscal relief; expected to be

revealed prior to his inauguration on 20th Jan.

- Meanwhile, 10Y UST yields may continue to be buoyed in this more elevated range of 0.94% to 1.28%.

•Survey results from Bloomberg, as of 8 Jan 2021; The lists are not exhaustive and only meant to highlight key data/events.

THB: Persistent THB outperformance in recent years justifies BOT’s concerns- Thai Baht (THB) has consistently outperformed regional peers on a REER and USD basis for some years now and is not just a 2020 trend, and persists in spite of more middling 2020 performance.- The outperformance of the THB REER has been particularly obvious since mid-2018 while the strength of THB becomes even more pointed when looking at gains vis-à-vis the US dollar. Point-to-point appreciation of the THB of ~17% from 1 January 2016 until 31 December 2020 is the highest among regional peers. - Notwithstanding the recent weakening of the THB in response to "Blue Wave" dynamics in the US, the deepening disconnect between trend THB appreciation and the anemic economic outlook clearly justify the Bank of Thailand's (BOT) concerns around the currency.- Moreover, with the Covid-19 situation flaring up again in Thailand, following the easing of some travel restrictions, the risk that THB gains front-run fragile economic recovery is still large. - Hence, BoT is amply justified in continuing to lean against excessive THB strength. And an expansion of FX/capital measures (from Nov 2020) to ease appreciation pressures is par for the course. - In addition, we do not rule out another 25bp policy rate cut (although not our base case) from the BOT should THB strength become particularly uncomfortable for the authorities.

BOK: Set to maintain status quo even in the face of rising Covid-19 infections- We, and consensus, expect Bank of Korea (BOK) to keep its policy rate unchanged at 0.50%.

- While BOK's official tone is likely to remain dovish especially given the sharp rise in COVID-19 infections in recent

weeks, we expect it will signal that further rate reductions are not on the cards under the current circumstances.

- Furthermore, it is unlikely that BOK's has reconsidered its position of refraining from formally introducing a

quantitative easing program while sticking to ad-hoc bond purchases to keep bond yields in check.

- Recent statements by officials including the BOK Governor suggest that concerns around financial stability risks

have increased. In particular, the disconnect between the weak real economy and lofty asset prices has widened

leading to concerns around risk management.

- The heavy lifting to support growth will be done by fiscal policy. The government approved a massive budget of

KRW558trn, including KRW4trn for vaccine distribution and pandemic relief measures.COVID QE: The Uni-QE Game in Town?

- QE will remain the elephant (or bull) in the room through 2021, if not 2022;- in spite of the vaccine and largely indifferent to the “Blue Wave”.- In which case, a broad-based boost to asset markets is par for the course.- But equally, despite echoes of GFC QE, resultant COVID QE-fuelled asset market boom may differ in thedetails; nuanced distinctions based on scale of monetary deluge, shifts in relative debasement risks frommore prevalent global QE and the context of vaccine reflation interacting with FAIT*.- For a start, the unprecedented scale of global QE liquidity may provide more emphatic lift for equities.- But QE may only slow, not stop, a rise in nominal yields as reflation expectations set in.- Although an out-run of inflation expectations will probably dampen real yields more effectively.- Consequent bearish USD trend is likely to be more differentiated (with high-inflation, “twin deficit EM FX likelyto under-perform). And Gold’s buoyancy as outright fiat hedges, while not fatally undermined, is subject toepisodes of headwinds/volatility from higher nominal yields.

ASEAN: Rising Covid-19 Cases Muddy Recovery Outlook

- The COVID-19 situation in Indonesia, Malaysia and Thailand has taken a turn for the worse in recent weeks. Daily

cases have hit new highs in these countries raising the spectre of national lockdowns; at the moment, the

restrictions implemented have been specific to the region of the outbreaks.

- The worsening situation risks derailing an already fragile growth recovery by impinging further on domestic

demand, in particular consumption and investment spending.

- The growth outlook is further obfuscated by rising Covid cases in major trading countries including US, Japan,

Korea and Taiwan, which will gnaw at external demand.

- Should the situation deteriorate in these ASEAN countries deteriorate, additional fiscal resources will need to be

mobilised to support growth while additional monetary policy easing could come sooner-than-expected.

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20

The COVID-19 situation has taken a turn for the worse in most ASEAN countries

Indonesia India Philippines

Malaysia Thailand

%population

Source: Bloomberg; Mizuho Bank

Forex Rate Bond Yield (%)

% Chg^ Week Forecast 8-Jan 2-yr Chg (bp)^

USD/JPY 0.72% 102.00 ~ 105.00 USD 0.133 1.2

EUR/USD 0.02% 1.195 ~ 1.236 GER -0.712 1.8

USD/SGD 0.37% 1.3180 ~ 1.3480 JPY -0.136 1.0

USD/THB 0.53% 29.80 ~ 30.50 SGD 0.233 -2.0

USD/MYR 0.22% 4.015 ~ 4.088 AUD 0.094 -0.3

USD/IDR -0.21% 13,950 ~ 14,350 GBP -0.143 4.3

JPY/SGD -0.46% 1.255 ~ 1.322 Stock Market

AUD/USD 0.82% 0.755 ~ 0.790

USD/INR 0.17% 73.0 ~ 74.2

USD/PHP 0.10% 48.0 ~ 48.7

^ Changes are on weekly basis

0.009

30.136

0.0003

103.94

1.2749

0.7757

1.2218 -0.524

48.076

73.25

0.046

0.124

-0.006

-30

0.006

14020 0.285

Nikkei (JP)

1.3255 0.005

Close

0.740

4.0293

0.159

Chg^Close*

Steepening

Curve

Steepening

12.0 Steepening1.121

9.7

3,824.68

Steepening

5.1

10-yr

1.115

0.028 1.5

Chg (bp)^

20.2

% Chg

EuroStoxx (EU)

2.59

6.01

4.66

KLCI (MY)

2.10 7,289.88

2,993.19

6,257.84

1.83

11.80.942

JKSE (ID)

Steepening

1.91 48,782.51

5.25

2.53

1,633.19 0.37

3,645.05

1,536.44

FTSE STI (SG)

PSEI (PH)

2.60

28,139.03

ASX (AU)

SENSEX (IN)

SET (TH)

S&P 500 (US)

6,757.87

Steepening

102.0

103.0

104.0

105.0

106.0

23-Nov 30-Nov 7-Dec 14-Dec 21-Dec 28-Dec 4-Jan

Daily USD/JPY

0.720

0.730

0.740

0.750

0.760

0.770

0.780

0.790

23-Nov 30-Nov 7-Dec 14-Dec 21-Dec 28-Dec 4-Jan

Daily AUD/USD

1.150

1.170

1.190

1.210

1.230

1.250

23-Nov 30-Nov 7-Dec 14-Dec 21-Dec 28-Dec 4-Jan

Daily EUR/USD

1.310

1.320

1.330

1.340

1.350

1.360

23-Nov 30-Nov 7-Dec 15-Dec 22-Dec 29-Dec 5-Jan

Daily USD/SGD

FX Theme: Will USD Bears Yield?- Pun intended. The question at the fore of every trader's mind is whether the sustained and brutal upswing

in nominal UST yields will challenge the dominance of USD bears.

- At this juncture, the underlying bearish USD trend, while subject to pitstops and periods of reflection, does

not appear to be facing an existential crisis. Not yet on a broad-based manner at least.

- While EUR is well off mid-1.23 highs, it is not on an unmitigated slide to 1.18 levels (in Nov).

- USD/JPY has also bounced to 104 from sub-103 tests, it is not at 105-106 of the earlier part of Q3 2020.

- Most tellingly, AUD has only barely edged off 0.78 highs and remains some 10-11% above lows of 70 cents

back in early-November. CNH too is at 6.47 levels; up some 3-4%.

- So what do we expect of the USD given the upswing in nominal yields?

- Well, first, we expect that so long as real yields remain soft, USD will not be squeezed up in an acute

and broad-based manner. But that said, there could be recalibrations.

- For one, much higher nominal US yields could take some shine off EM currencies subject to high

inflation and/or twin deficit risks. Here, susceptibility to cost-push and C/A erosion from higher Oil prices is a

notable Achilles heel. And so INR has under-performed.

- Second a resurgence in COVID cases, with restrictions re-imposed across Asia; including Japan, Taiwan

and ASEAN could also dampen gains in EM Asia FX thus far.

- Finally, a steeper UST yield curve could also reduce depreciation pressures on the USD.

- Hence, the pace of gains against USD will likely be checked even for sturdier currencies such as AUD

(with all its commodities boost) and CNY. Meanwhile, more "vulnerable" EM currencies may slip off recent

JPY: "Emergency" Recoil- To suggest that the USD/JPY has rebounded on worries about on worries about a resurgence in COVIDcases (with evidence of the newer more infectious strain) esulting in an "Emergency" being declared inTokyo and Osaka are not unsubstantiated.- After all, this is reason for worries about Japan's recovery being interrupted, or worse, Tokyo Olympics p[lansdbeing disrupted. And that is sufficient cause for JPY to recoil from recent highs (sub-103).- But equally,it is hard to deny that the strong upswing in UST yields is also consistent with higherUSD/JPY based on significantly wider UST-JGB spreads (10Y).- But to be sure, some pullback in JPY strength is welcome relief for the BoJ and MoF.- So, for the JPY, this "emergency" reflex is in fact a relief. And we can expect USD/JPY to be traded in the mid-102 to mid-105 range for now, depending on COVID and UST yield outcomes.

EUR: Bulls Interrupted- EUR bulls have been setback friom mid-1.23 as COVID worries and higher USDT yields hammer.- Sub-1.22 though is more a reflection of EUR bulls interrrupted than decimated.- We expect that USD tone may be more driven by real US yields on a durable basis.- But for now, sudden moves in UST yields towards 1.2% could invariably induce more profit-taking on EUR long;especially given that stretched short USD sepculative positions need to be wringed out.- The COVID situation, more specifically whether tighter restrictions need to be re-imposed, may also weigh on theEUR for now. As such we cannot rule out bouts of pullback with sub-1.20 a risk.- That said, USD bears have not been put to sleep for good. And so EUR may remain bouncy on dips, rather thanon a one-way and pronounced slide.

SGD: CNY boost to Fade- Despite a boost from sub-6.48 CNY, SGD boost will begin to fade as EUR and JPY pullback.- Especially as USD bears on the whole have been setback by sharply higher UST yields.- So regardless of less dire than expected Q4 GDP flash (and full-year 2020 GDP), as well as a likely upwardrevision, SGD is not set for out-performance in the very near-term.- Primarily becuse USD bears have taken a back seat and MAS stance is for a steady S$NEER; which is to saythat trade-weighted SGD out-performance is not on the cards.- We expect that USD/SGD could consolidate in the 1.32 to 1.35 range for now; with sub-1.32 relapse likely

to be shallow and short-lived unless UST bears resume with a vengeance.

AUD: Reflation Support, but Watch for RBA Pushback- The upswingin UST yields have not materially dented AUD; at leaast not relatiev to other G10 currencies as theAntipodean remainsn near 78 cents; up some 10-11% from Q4 lows around 70 cents.- One reason why AUdD is not as badly impacted by higher UST yields is becasue a long AUD position is verymuch part of the "reflation" trade.- And AUD has specifically a broad-based boost from both industrial (iron ore, copper) and energy (LNG,coal) commodities, positioning it favourably for the vaccine play.- However, a fimer USD could at the very least check scope for upside.- More importantly, RBA disapproval of excessive AUD gains too quickly could potentially take some windout of AUD sails. So RBA's QE will be watched.- Finally, COVID outbreak in Australia may also be another AUD dampener; so peaking AUD in the 0.76-0.79 range is more likely than not.

Important InformationThis publication has been prepared by Mizuho Bank, Ltd. (“Mizuho”) and represents the views of the author. It has not been prepared by an independent research department and it has not been prepared in accordance with legal requirements in any country or jurisdiction designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. MHBK provides this information for free. Please request for cancellation of subscription if you do not want to receive free-of-charge information from MHBK.

DisclaimerUnless otherwise stated, all views or opinions herein are solely those of the author(s) as of the date of this publication and are not to be relied upon as authoritative or taken in substitution for the exercise of judgement by any recipient, and are subject to change without notice. This publication has been prepared by Mizuho solely from publicly available information. Information contained herein and thedata underlying it have been obtained from, or based upon, sources believed by us to be reliable, but no assurance can be given that the information, data or any computations based thereon areaccurate or complete. This publication provides general background information only. It is information in summary form and does not purport to be complete. This publication has been prepared for information purposes only and is not intended by Mizuho or its affiliates to constitute investment, legal, accounting, tax or other advice of any kind and all recipients of this publication are advised to contact independent advisors in order to evaluate the publication, including, without limitation, the suitability of any security, commodity, futures contract or instrument or related derivative (hereinafter, a “financial instrument”), product or strategy herein described. This publication is not intended to be relied upon as advice to investors or potential investors and does not take into account investment objectives, financial situation or needs of any particular investor. It is not intended for persons who are Retail Clients within the meaning of the United Kingdom’s Financial Conduct Authority rules nor for persons who are restricted in accordance with US, Japanese, Singapore or any other applicable securities laws.This publication has been prepared for information purposes only and is not intended by Mizuho to market any financial instrument, product or service or serve as a recommendation to take or refrain from taking any particular course of action or participate in any trading or other strategy. This publication is not an offer to buy or sell or a solicitation of any offer to buy or sell any security or any of the assets, businesses or undertakings described herein, or any other financial instrument, nor is it an offer to participate in any trading or other strategy, nor a disclosure document under applicable laws, rules, regulations or guidelines. Nothing contained herein is in any way intended by Mizuho or its affiliates to offer, solicit and/or market any financial instrument, product or service, or to act as any inducement to enter into any contract or commitment whatsoever. Neither the author, Mizuho nor anyaffiliate accepts any liability whatsoever with respect to the use of this publication or its contents or for any errors or omissions herein.Mizuho and its affiliates, connected companies, employees or clients may take the other side of any order by you, enter into transactions contrary to any recommendations contained herein or have positions or make markets or act as principal or agent in transactions in any securities mentioned herein or derivative transactions relating thereto or perform or seek financial or advisory services for the issuers of those securities or financial instruments.All of the information contained in this publication is subject to further modification without prior notice and any and all opinions, forecasts, projections or forward-looking statements contained herein shall not be relied upon as facts nor relied upon as any indication of future results. Opinions stated in this publication are subject to change without notice. Future results may materially vary from such opinions, forecasts, projections or forward-looking statements. The information contained in this publication may not be current due to, among other things, changes in the financial markets or economic environment. Mizuho has no obligation to update any information contained in this publication. Past performance is not indicative of future performance. This is a strictly privileged and confidential publication. This publication contains information addressed only to a specific individual and is not intended for distribution to, or use by, any person other than the named addressee or any person or entity in any jurisdiction or country where such distribution or use would becontrary to law or regulation. Save with Mizuho’s prior written consent, you may not disclose, divulge, reproduce or furnish any information contained herein to any other party. Please notify the sender immediately if you have mistakenly received this publication.

Singapore: Mizuho is licensed as a bank under the Banking Act (Chapter 19) of Singapore, and is regulated by the Monetary Authority of S ingapore.

Japan: Mizuho is authorised and regulated by the Financial Services Agency of Japan.

United Kingdom / European Economic Area: In the UK, Mizuho is authorised by the Prudential Regulation Authority and subject to regulation by the Financial Conduct Authority and limited

regulation by the Prudential Regulation Authority. Details about the extent of MHBK's regulation by the Prudential RegulationAuthority are available upon request. This publication may also be distributed by Mizuho International plc (“MHI”). MHI is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.

United States: This publication is not a “research report” as defined in Commodity Futures Trading Commission (“CFTC”) Regulations 1.71 and 23.605. The content of publications distributed by

Mizuho Securities USA Inc. (“MSUSA”) is the responsibility of MSUSA. The content of publications distributed directly to US customers by Mizuho is the responsibility of Mizuho. US investors must effect any order for a security that is the subject of this report through MSUSA. © 2014 Mizuho Bank Ltd.